The Real Estate Transaction As We Know It Now
Before the pivotal date of August 17, 2024, real estate transactions in the United States operated under a traditional model where cooperation compensation was the norm. This meant that when a home seller listed their property, they would enter into an agreement with a Listing Broker. This agreement detailed the commission the seller would pay, which was then shared with the Buyer’s Broker as an incentive to bring potential buyers to the property. This sharing of commissions was not always transparent to the buyer, who might have assumed that the services provided by their agent came at no direct cost to them.
In this model, the buyer’s relationship with their agent was often informal, with no requirement for a formal written agreement to define the agent’s compensation or the scope of their services before viewing homes.
The Shift After August 17, 2024
Post-August 17, 2024, marks a significant shift in how real estate transactions are conducted, particularly in terms of transparency and compensation. Going forward, Buyer’s Agents must have a written agreement with their clients before they begin touring homes. This agreement will clearly outline the compensation that the Buyer’s Agent will receive, ensuring that the buyer is fully aware of any costs involved.
Moreover, the practice of cooperation compensation is being phased out. Instead of the Listing Broker sharing a portion of the commission with the Buyer’s Broker, all compensation will be directly managed by the seller or buyer. This means that the buyer may now be responsible for compensating their agent directly, rather than this cost being embedded in the overall transaction. The new rules ensure that compensation is clearly defined and agreed upon upfront, eliminating potential conflicts of interest and promoting a fairer, more transparent process.
Implications for Buyers and Sellers
For buyers, these changes mean taking a more active role in understanding and negotiating their agent’s compensation. Buyers will need to budget for these costs as part of their overall home purchase and should ensure that they fully understand the terms of their agreement with their agent.
For sellers, the shift requires a more strategic approach to listing properties. Without the traditional incentives offered through cooperation compensation, sellers will need to negotiate directly with buyers and their agents, ensuring their property remains attractive in a competitive market.
The 2024 NAR settlement ushers in a new era of transparency and fairness in real estate, making it essential for both buyers and sellers to stay informed and adaptable to these changes.
Want to learn more about these changes? Give me a call at 404-502-8683
This video from Sharran Srivatsaa of ГЕA⅃ is also extremely helpful.
